Summary

This wave of stampede-like buybacks is the “vintage year” exit pressure created jointly by high-valuation funds from around 2016 entering their exit window, capital turning cautious after 2020, and IPO tightening after 2023. Buybacks that once accompanied D-round and Pre-IPO financings migrated down to angel and A rounds, leaving many companies that had yet to scale—and in some cases had only a few million yuan in revenue—with obligations equal to principal plus 10%-12% annual interest. JowJow worries that over the next 2-3 years, a group of high-quality tech founders who raised substantial capital could face even worse buyback situations.
As the capital base shifted from dollars and market-driven RMB to predominantly state-owned RMB, investment behavior shifted from simply pursuing returns to first proving procedural compliance and that no state assets had been lost. JowJow estimates that 3-5 years ago, market-driven RMB and state-owned RMB each accounted for roughly half the market; today, state-owned capital may represent 90%-95% of primary-market funding. Even funds carrying dollar brands increasingly depend on state-owned capital, listed companies, unlisted groups, and mezzanine financing. Buyback notices, lawsuits, and harsh terms therefore serve both economic and liability-protection functions: “When the only liquid capital left in the market is RMB, and specifically state-owned RMB, the entire investment process becomes distorted.”
Actual cash recovery rates in buyback litigation are extremely low, yet cases are still launched en masse because of fiduciary duties, procedural compliance, and statutes of limitations. Shanghai sampling data cited on the show found that courts supported buyback claims in roughly 82% of cases, founders were named as defendants in 90%, and about 10% of founders became judgment defaulters; the execution recovery rate, however, was only about 6%, with full recovery achieved in just 4.62% of cases. A Supreme People’s Court Q&A has been understood by the market to mean that an exercise notice should be sent within 6 months after a buyback comes due, with 3 years to sue after the notice, making failure to initiate proceedings potentially damaging to a fund’s future right to sue and its compliance record.
The boardroom has shifted from a forum where shareholders jointly build a company into a life-or-death arena where different financing rounds fight over the remaining cash. Shareholders may use their consent rights over new financing to demand priority exits—for example, refusing to sign a term sheet for RMB200M-RMB300M of new funding unless RMB50M is first paid to them. In more extreme cases, they may threaten to report the company to tax or market-regulation authorities or investigate the founder’s personal assets. 卫诗婕 summed it up as a domino effect: everyone fears that someone else will run first, until the situation reaches “a point that tests human nature.”
With IPOs and M&A narrowing at the same time, buybacks—the path most damaging to the company—have become the easiest exit for many funds to initiate. Estimates cited on the show suggest that around 130,000 projects will face exit pressure in succession, while far fewer than 5,000 of the more than 5,000 A-share companies have both the capacity and the willingness to acquire. Buyers are therefore no longer valuing targets on PS or PE; they focus on net assets, historical financing, and liabilities, pricing companies “based on the absolute lowest, worst-case scenario.”
A startup’s income statement may still look healthy while its real cash flow is being drained simultaneously by delayed collections, litigation asset freezes, and chains of loan rollovers. Collections that once took 3 months now take 6, then 9, then a year; a company’s RMB50M in loans may also be spread across 8-10 banks, and a single lender’s refusal to roll over the loan can break the entire cash-flow chain. JowJow says banks have told him that more than 50% of companies can only repay interest when refinancing, not principal: “These startups have all become credit-card slaves…big credit-card slaves.”
A downturn does not eliminate entrepreneurial opportunity, but the winners must shift from relying on the next financing round to low-cost organic cash generation, high output per employee, and disciplined expansion. JowJow estimates that starting a company is at least 3-5 times harder than before, and as much as 10 times harder in cash-flow-poor industries. The upside is that fewer competitors leave more concentrated resources for companies that can sell cheaply and collect cash consistently. For founders facing buybacks, the priority is not emotional confrontation but hiring specialist counsel early, persuading early shareholders to stand with the company, and accepting a discounted exit or “using time to create room.”

Deep dive

1. Buyback Clauses Descend from Mature-Company Circuit Breakers to Personal Bombs for Early-Stage Founders

JowJow first draws a reasonable boundary: for a D-round, F-round, or Pre-IPO company, the business is relatively mature and the financing amount is large, so investor protection of principal through a buyback after an unsuccessful IPO “makes perfect financial sense.” But when late-stage terms are copied directly into angel, A-round, and growth-stage deals, the party bearing the risk has changed.
An A-round company has often only just demonstrated PMF. RMB1M or RMB2M in sales “doesn’t count as market validation”; even reaching RMB10M is only preliminary validation and does not show that the model can be rolled out at scale. Making such a company and its founder bear a buyback obligation effectively writes unformed repayment capacity into the contract.
At the peak of “mass entrepreneurship and innovation,” institutions would ask founders to sign a TS on the day they met. Many founders had no professional legal support and had not seriously read the terms; some even signed personal unlimited joint-and-several liability. Years later, they discovered that the early agreement contained “a massive time bomb.”
In JowJow’s observation, around 60%-70% of RMB investments included buybacks 10 years ago, while early dollar funds sometimes used a “one-page agreement” to signal that they were founder-friendly. Today, almost every RMB fund writes buybacks into its contracts. The provision has gradually shifted from protecting an investor’s downside to serving as a compliance posture proving that the manager “didn’t invest casually.”

2. The 2016-2017 Project Grab Turned Buy-Low, Sell-High into a High-Priced Relay

JowJow entered the industry during Internet 2.0: BAT had already taken shape, while Pinduoduo, Toutiao, and ByteDance were still early-stage companies, and ofo and Mobike had just entered their angel rounds. Angel valuations in 2012-2013 could still be only a few million yuan; in 2014-2015, many projects were already valued at tens of millions of yuan.
By 2016-2017, institutions had raised large amounts of new capital, and a star founder with “nothing but a team” could quote a $100M angel valuation. High-quality projects were scarce and capital was abundant, with multiple institutions accepting high prices and creating an unusually active two-sided market between investors and founders.
To win deals, investment managers would talk with founders until late at night, share personal experiences, and even “perform their talents” to build rapport; signing a deal on the spot was treated as evidence of ability. When 卫诗婕 asked whether investing was not fundamentally about buying low and selling high, JowJow’s answer was blunt: if the entry price was already expensive, it naturally compressed the room for the eventual exit.

3. A Fund’s Real Performance Depends on Its Vintage Year and Cash Back

JowJow compares funds with wine: “Just as the wine industry has vintages, funds have vintages too.” Marking RMB100M on the books at RMB1B does not mean the fund made money; what matters is whether it can bring RMB1B of cash back when the fund matures.
The first strong vintage comprised funds established in 2009-2012. Their portfolio companies caught the 2016-2017 Nasdaq listing window, producing a batch of genuine cash back rather than merely attractive figures driven by valuation expansion.
The second was the cohort of RMB funds that invested in mid- to late-stage new energy, new materials, intelligent manufacturing, and semiconductor companies in 2017-2019. They benefited from the expansion of the STAR Market and ChiNext from 2020 to 2023. Some companies grew from RMB200M-RMB1B in revenue to the low tens of billions or even the high tens of billions of yuan; others were only upper-middle performers that managed to “get ashore” because IPO access was loose.

4. From Holding Cash in 2020 to Tighter IPO Rules in 2023, the Marathon Lost Its Finish Line

JowJow first sensed the exit risk in 2021: the disruption of the special period had hit business operations, and even shareholders whose funds had not yet matured were beginning to calculate how to get their money out. Funds established around 2016 then entered their 5-6-year investment periods and 7-year exit periods, with pressure becoming concentrated in 2022-2023.
Capital did not disappear instantly in 2020. Investors held cash on the sidelines amid uncertainty over the economy and international relations; 6 months became a year, then 2 years, and eventually the IPO channel tightened. 卫诗婕’s metaphor was that investors used to run a marathon knowing where the finish line was, but “suddenly, they could no longer see where the finish line was.”
There was an intervening wave of dollar capital betting on pandemic-driven digitization, which pushed software and SaaS valuations sharply higher in 2021-2022. But by the second half of 2022 and the first half of 2023, more large IPO projects were being terminated, and investors began asking: “How do we exit in the future?”
Cross-border listings also became progressively harder. The show cited a rule under which holding data on roughly 1M users could trigger a filing requirement, followed by the need to obtain approval from the relevant industry regulator. With both domestic and overseas channels narrowing, the relay model that had previously depended on IPOs lost its finish line.

5. Once Capital Became State-Owned, the Primary Goal Shifted from Making Money to Avoiding Mistakes

JowJow estimates that 3-5 years ago, market-driven RMB and state-owned RMB each accounted for roughly 50% of the market; today, state-owned capital may account for 90%-95%. As US dollar capital has declined, many funds with dollar brands have also had to build RMB pools, with the actual money coming from state-owned capital, listed companies, unlisted groups, or mezzanine financing.
State-owned asset managers must support investment attraction, anchor-company ecosystems, and local industrial plans while avoiding liability for the loss of state assets. Making money is welcome, but losses can trigger investigations up the chain. Investment decisions therefore seek not only returns but also enough documentation to prove that every step followed the rules.
JowJow identifies the incentive mismatch: the manager earns a system salary but may see a career derailed by a single failed investment. Harsh terms, buyback notices, and litigation are therefore not merely collection tools; they are also liability-protection actions taken “to prevent problems before they arise.”

6. Fund Maturities Turned the Boardroom into a Sprint Among Different Financing Rounds

Tense board meetings began appearing in 2022 and became significantly more common from the second half of 2023 through 2024. JowJow describes the room as “truly a battlefield”: the founding team sits with shareholders from every round, while A, B, C, and D investors each face different priorities and pressures.
Many companies facing buybacks have already reached the C round, D round, or Pre-IPO stage, and some have even become unicorns. Each subsequent financing may exceed RMB100M, leaving the founder and management responsible not for one small early-stage investment but for principal and interest across multiple rounds worth more than RMB100M each.
Once one shareholder initiates a buyback, the others fear that the remaining cash will be taken first, creating a domino effect. Later-round investors with contractual priority want to leave first, while early-round investors know that “once you take the money, there will be nothing left for me”; the shared goal of growing the company quickly gives way to individual self-preservation.
The case that drew widespread attention last September involved Shenzhen Capital Group launching lawsuits against portfolio companies in batches. Because of its state-owned background, it also had to hire law firms through public tendering, giving the outside world a glimpse of how buybacks had shifted from isolated disputes to institutionalized disposal.

7. Extremely Low Recovery Rates Have Not Stopped Litigation Because Filing Suit Is Itself Proof of Responsibility

Shanghai sampling data cited on the show found that courts supported buyback claims in roughly 82% of cases, founders were named as defendants in about 90%, and approximately 10% of founders ultimately became judgment defaulters. Judicial support for a claim does not mean the investor receives cash.
In the same dataset, the execution recovery rate was only about 6%, and just 4.62% of cases achieved 100% recovery. JowJow therefore acknowledges that buybacks have very low economic effectiveness, but market-driven funds still owe fiduciary duties to their LPs and must at least take action to seek principal recovery.
For state-owned capital, litigation is even more clearly part of procedural compliance: even if no money is ultimately recovered, it can prove that the manager made every effort to protect state assets. 卫诗婕’s summary was: “I did everything I could”; whether cash was recovered is a separate question.
A Supreme People’s Court Q&A further accelerated the push to act. 卫诗婕 stressed that it is not a statute or judicial interpretation; her plain-language reading is that an exercise notice should be sent within 6 months after the buyback comes due, and suit can be filed within 3 years after the notice. Missing those steps could affect the subsequent right to sue.

8. Contractual Priority and Judicial Sequencing Combined to Create a Stampede

Contracts typically give later-round shareholders higher buyback priority, but JowJow points out that when multiple provisions have matured, the case filed first may be handled first. Even early-round shareholders with lower contractual priority therefore have an incentive to initiate judicial proceedings before everyone else.
An unmatured buyback claim will not be supported, but a shareholder may still apply pressure ahead of time. Once everyone enters the maturity window at the same time, the expectation that “whoever moves fastest gets paid first” is enough to trigger a stampede rather than a wait for the company to recover.
启明创投 partner 邝子平 has publicly opposed this destructive form of buyback. That position reflects both industry responsibility and the practical interests of an early-stage fund: early shareholders sit lower in the buyback order, and once the company is pushed into insolvency, their chance of recovery falls further. Continuing to litigate ultimately becomes a “everyone loses” outcome for investors and founders alike.

9. New Financing, Regulatory Reports, and Personal Assets All Become Buyback Bargaining Chips

In one case JowJow saw, the company had secured a TS for RMB200M or RMB300M of new financing, but an old shareholder refused to sign and demanded that RMB50M of the new money first be used for a partial buyback. Because the follow-on financing required the registered shareholder’s signature, the company had to face the pressure.
In another project, the final-round shareholder threatened to report the company to tax or market-regulation authorities if the buyback was not resolved. The report might not succeed, but it could create trouble for the company and bring the founder in for questioning; to protect the larger business, the founder might be forced to compromise.
More abusive tactics mentioned by JowJow included encouraging competitors to file malicious lawsuits. 卫诗婕 added that she had heard of institutions in other industries hiring private investigators to inventory a founder’s personal assets as a negotiating lever. JowJow said that when the market is hot, growth hides many problems; once conditions deteriorate, the parties begin bargaining over human nature.
These actions also damage the company’s ability to repay. Customers who see reports or lawsuits may stop signing contracts, and the company may not even make the final bidding list. In trying to preserve one asset, an investor may instead destroy the entity that generates the cash flow.

10. Limited Joint-and-Several Liability Can Turn a Founder into a Defaulter; Unlimited Liability Can Bring Down the Entire Family

With limited joint-and-several liability, the worst outcome for a founder may be spending restrictions and placement on the judgment-defaulter list. Until the debt is resolved, the founder cannot engage in high-consumption spending or take high-speed rail; business travel means driving or taking a slow train. A failed company thus becomes a punishment attached to the founder’s daily life for years.
Unlimited joint-and-several liability reaches into property and family assets, potentially pulling in the spouse and the entire household. JowJow described the consequences in the starkest terms: “A founder can genuinely be driven to the point of family ruin.”
After 2020, some RMB funds required founders’ spouses to sign acknowledgments of awareness, limiting their ability to later claim ignorance. At the other extreme, some founders divorced to ring-fence family assets, preferring to become defaulters themselves in order to protect their spouse and children as much as possible. 卫诗婕’s judgment on hearing this was: “It has reached a point that tests human nature.”

11. Winning the Judgment Can Still Mean Losing the Asset Because Litigation Is Killing the Company

JowJow and buyback lawyers estimate that for a RMB10M claim, litigation or arbitration fees may be around RMB200K, legal fees around RMB100K, and asset-preservation costs around RMB200K; after adding a success fee, the total cost could reach RMB1M or more.
Even after winning a judgment, the money may not come back on time. Asset preservation, management time consumed by the case, and blocked customer contracts can further weaken operations. Litigation has a poor ROI, but every fund keeps launching it because each one needs to complete the required compliance action.
This is the concrete meaning of 邝子平’s warning not to “drive the company and founder into a dead end.” The founder faces spending restrictions and potential claims on family assets, while the fund continues spending on litigation with little chance of recovery; the cash-flow prospects of both the company and the investor may deteriorate further.

12. IPOs and M&A Failing at the Same Time Made Buybacks the Easiest Exit to Initiate

Private equity has only 3 exits: IPO, M&A, and buyback. The show estimates that the domestic IPO queue may already extend beyond 18 months, with demanding performance requirements; a US listing requires clearing data and industry-regulator approvals, so IPOs have been ruled out for a large number of projects.
Policy encouraged listed-company M&A in the second half of 2024, but a transaction requires at least 2 conditions: the target must create direct industrial synergies and must be cheap enough. Listed companies also have to answer to regulators, institutional shareholders, and retail shareholders in a vote; paying too much requires an explanation of why the price was reasonable.
卫诗婕 cited a report estimating that the actual value of domestic private-equity exits was less than one-quarter of the US figure for the same period, while around 130,000 projects will face exit pressure in succession.
More than 5,000 A-share companies clearly cannot absorb more than 130,000 projects, and the number with genuine M&A capacity is far smaller than 5,000. IPOs and M&A both require third-party participation; a buyback only requires the investor and founder to communicate and initiate the relevant judicial process, making the worst path the easiest one to take.

13. M&A Favors Familiar, Cheap Targets; Some Founders Trade Away Everything to Get Unstuck

Listed companies are more willing to acquire businesses they have already invested in, where they are major shareholders, or whose operations they know, rather than unfamiliar assets. JowJow says that one side may have more than 20 interested parties and the other more than a dozen shareholders; getting everyone to reach a consensus within a year is extremely difficult.
The show uses Beisen’s acquisition of Kuxueyuan as an example: the founder of Kuxueyuan received little money, while investors received around RMB180M in listed-company stock. The founder was still willing to sell control to the listed company because continuing to support the business for another 2-3 years would most likely not generate enough to repay its historical financing; being released from the buyback obligation was itself an acceptable outcome.
卫诗婕 calls this “still being able to find someone willing to take it on.” Once the window closes, there may be no one left to extend an olive branch, as she observed with ofo in the past. M&A is no longer necessarily a way to monetize entrepreneurial value; it may instead mean trading control for freedom from the buyback obligation.
JowJow says state-owned capital takes new shares but not old shares, and he has never seen a state-owned investor acquire old shares in bulk. Even if buying at a discount lowers the all-in cost, a failed project could still leave the manager facing questions about why the transaction was not done at an even lower valuation or whether there was an exchange of benefits. The risk of future accountability means that even the buyers with the most capital do not want to assume historical equity.

14. A Pure Buyer’s Market Compresses Valuations from PS and PE Down to Net Assets and Liabilities

Listed-company investment and financing executives first ask how much the project has raised and how much net assets it has, rather than valuing it on PS or PE. Historical financing represents the buyback burden still to be resolved, while assets on the balance sheet determine what can be recovered in the worst case; the price is reverse-engineered from downside risk.
In extreme cases, a founder may be willing to give away the shares for zero. If the company has RMB30M in liabilities and only RMB5M left on its books, a buyer taking the assets must also assume the liabilities; unless the business can generate more than RMB30M, or even RMB60M, in net income, there is no reason to take it over.
Even when an investor finds a buyer, other shareholders may refuse to cooperate with the company-registration change: “He hasn’t exited—why do you get to exit?” Everyone is effectively tied together by 10 legs; if one person refuses to move in the same direction, everyone falls.
卫诗婕 compares companies being marked down to factories liquidating their remaining inventory on the roadside. More painfully, a company is “really like a child” to its founder, who may now have to consider selling or giving it away cheaply just to prevent the child and the family from sinking together.

15. Companies with Acceptable Income Statements May Already Be in a Negative Cash-Flow Loop

The most absurd bottleneck during the special period was that a customer wanted to pay but could not because its finance team could not get to the company to plug in the USB security token. The company could not collect cash, while wages still had to be paid. After the special period ended, the problem shifted from physical obstruction to a broad slowdown in customer budgets, orders, and payments.
Collections that once took 3 months became 6, then 9, then a year; orders that would normally have been placed in January and February were broadly pushed into March and April. Companies were neither winning new orders nor collecting on delivered projects—the “inflow” and “outflow” sides were deteriorating at the same time.
Reported revenue and net profit could therefore be little more than receivables, while cash was already precarious. 卫诗婕 also noted that companies were afraid to leave cash sitting in their accounts, because once a shareholder initiated a buyback or lawsuit, the money could immediately be transferred away or become subject to legal disposition.
The chain ultimately reaches layoffs. 卫诗婕 believes layoffs will continue, while JowJow responds that much of the net-profit growth at large tech companies has “all been cut out through layoffs.” For startups, “staying alive is a victory,” but that does not mean they are living better.

16. Low-Interest Loan Rollovers Turn Companies into Credit-Card Slaves; Countercyclical Entrepreneurship Requires Organic Cash Generation

During the high-growth years, a 10%-12% annual buyback rate still looked cheap compared with high-interest lending, while banks were reluctant to lend to small and midsize companies. Today, specialized and sophisticated SMEs, “little giants,” and hidden champions may obtain unsecured 1-year loans of a few million to tens of millions of yuan at 2%-3% interest, reversing the cost of capital.
The risk lies in chained loan rollovers. A company’s RMB50M in loans may come from 8-10 banks, requiring it to borrow from one bank to repay another; if any one lender stops rolling over the loan, the entire cash-flow chain breaks. Lower barriers than in the past—when borrowers were required to pledge homes or factories—do not mean the company has the ability to repay principal.
JowJow says banking contacts told him that more than 50% of companies can only pay interest when refinancing, after which a tacit understanding among banks allows the principal to be rolled over. His summary: “These startups have all become credit-card slaves, just like people trapped in credit-card debt—big credit-card slaves.”
JowJow estimates that starting a company is now at least 3-5 times harder, and as much as 10 times harder in cash-flow-poor industries. But fewer competitors leave room for teams with low-cost sales, high output per employee, and organic cash generation. His advice to founders already caught in buybacks is not to panic, hire specialist counsel early, try to bring early shareholders onto the company’s side, and accept discounted exits or “use time to create room”; otherwise, over the next 2-3 years, a group of high-quality tech founders may face even worse conditions.

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